India Corporate Bonds
Yields in thin band as market awaits US CPI data
This story was originally published at 20:36 IST on 13 November 2024
Register to read our real-time news.Informist, Wednesday, Nov. 13, 2024
By Sachi Pandey
MUMBAI – Yields on corporate bonds ended another session on a steady note Wednesday as activity in the secondary market was muted and investors engaged in only need-based trades, dealers said. Some participants chose to stay on the sidelines ahead of US CPI data for October, which could signal a clear view on rate cuts and economic policy in the US, dealers added.
"There is no activity at all. I think after today's inflation report (US CPI) is out, things will become clear. Everybody was expecting one more rate cut by the US in December, but again that will depend on CPI numbers," a fund manager of fixed income markets at a large-sized insurance company said.
The October US CPI inflation rate is projected to rise to 2.6% from 2.4% in September, driven by base effects, according to Dow Jones. If inflation exceeds this level, it might deter the US Federal Reserve from proceeding with a 25-basis-point rate cut next month, dealers noted. The CME FedWatch tool shows only a 59% chance of a 25 bps rate cut in the US in December, despite the median guidance by Fed officials for a potential quarter-percentage-point reduction.
In the corporate bond secondary market Wednesday, investors avoided placing large bets and mutual funds stuck to churning their portfolios while they waited for benchmark government bond yields to react to the impending inflation data, dealers said. "G-sec (government securities) market today was slightly higher, so people are thinking it might go high from here. So they are just waiting to get it stable and then enter the market," a dealer at a mid-sized brokerage said. Yields on government bonds edged higher tracking a rise in US Treasury yields ahead of the US CPI report due 1900 IST.
Banks and mutual funds were active participants on both the buying and selling sides of the market, dealers said. Lacklustre activity led to lower volumes, with deals aggregating to INR 96.39 billion being recorded on the National Stock Exchange and BSE combined on Wednesday, compared with INR 104.30 billion Tuesday.
Papers issued by SBI Cards And Payment Services Ltd., REC Ltd., HDFC Bank, National Bank for Agriculture and Rural Development, SMFG India Credit Company, Tata Capital Financial Services Ltd., and Small Industries Development Bank of India were traded the most on the bourses.
The primary supply was light on Wednesday, with only Hinduja Leyland Finance Ltd. and ICICI Home Finance Co. tapping the markets to raise funds through corporate bonds. ICICI Home Finance raised INR 6 billion via a November 2027 bond, while Hinduja Leyland Finance raised INR 5 billion through bonds maturing in three years.
On Thursday, National Housing Bank has invited bids to raise up to INR 50 billion through unsecured bonds maturing on Nov. 17, 2034. Last week, Informist reported exclusively that National Housing Bank was in talks with arrangers to raise INR 30-50 billion through bonds this week. According to market experts, the company can bag a coupon in the range of 7.05-7.10%.
DCB Bank is also in queue to tap the bond market Thursday with its 10-year bond issuance. The bank plans to raise INR 4 billion. Adani Airport Holdings Ltd. has invited bids to raise INR 1 billion via a Jun 2028 bond issue.
Primary supply is expected to increase next week with marquee issuers like State Bank of India in line to tap the bond market. SBI plans to raise up to INR 100 billion through infrastructure bonds maturing in 15 years, and has invited bids for the same Monday.
UDAY BONDS
In the secondary market, Punjab's Ujwal DISCOM Assurance Yojana bonds worth INR 2.50 million, maturing in 2028, were traded at a weighted average yield of 6.9850%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.
BENCHMARK LEVELS FOR CORPORATE BONDS:
TENURE | WEDNESDAY | TUESDAY |
Three-year | 7.47-7.49% | 7.47-7.50% |
Five-year | 7.42-7.44% | 7.42-7.44% |
10-year | 7.22-7.24% | 7.20-7.24% |
End
Edited by Rajeev Pai
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